We launched Square for Restaurants, our third industry-specific point of sale and our first for full-service restaurants.

Square for Restaurants, together with Square Appointments and Square for Retail, rounds out our industry-specific point-of-sale offerings for food, services, and retail—industries that together represent approximately 85% of our GPV. With Square for Restaurants, we are now able to meet the needs of full-service restaurants (FSRs), which represent a total addressable market of over 300,000 restaurants that generate nearly $200 billion in annual gross receipts in the U.S.¹ The average annualized GPV of a Square for Restaurants seller is more than $650,000, demonstrating that the product resonates with larger sellers.

FSRs are busy and have complex needs—Square brings speed and ease of use to the restaurant point of sale, making it easy for servers to delight diners while managing tables, orders, courses, and tickets. “Back of the house” functionality, such as revenue and cost reporting, enables managers and owners to make informed decisions and run an efficient business. Speed and ease of use also extend to the onboarding and customization process: While most restaurant points of sale require assisted implementation, to date more than 60% of Square for Restaurants sellers have self-onboarded. Additionally, we are enabling restaurants to manage an omnichannel business. Square is the only company that provides both the point of sale and the food delivery and pickup platform, and we are integrating Caviar with Square for Restaurants.

Located in San Francisco, Bar Agricole specializes in food and drinks that celebrate local, seasonal ingredients. The restaurant wanted to upgrade to a new system that would allow it to easily update its menu and seating configurations. Bar Agricole chose Square for Restaurants because it was easy to install and customize, and it provides the flexibility the business needs to operate efficiently. Taking advantage of the Square ecosystem, Bar Agricole uses Square Stand and our contactless and chip reader to accept payments and Square Payroll to pay its employees. It has also taken a Square Capital loan to grow the business. Bar Agricole has implemented Square for Restaurants at its sister restaurant, Trou Normand, and its new delivery-only Caribbean concept, Obispo, is exclusive to Caviar.

SELLER HIGHLIGHT

When we decided it was time to change our point-of-sale software, it was important that we choose a solution and company that really understood our complex restaurant needs and could evolve with us. Square has done just that; this new software has helped us streamline our business with its simplicity, intuitiveness, fast setup, and customization options.”

Chris Hanawalt

Bar Agricole

San Francisco, CA

Caviar is growing rapidly: Revenue in the second quarter of 2018 more than doubled year over year.

Caviar makes it easy for restaurants to offer diners more ways to order, handling all the logistics and technology so the restaurant can focus on food. For diners, Caviar facilitates a wide variety of fulfillment types (pickup, delivery, group ordering) through an easy-to-use experience that delivers personalized recommendations powered by machine learning. Caviar also offers diners popular restaurants and menu items they cannot get on any other food-ordering platform: More than 25% of food order volume is driven by restaurants that are exclusive to Caviar.

Rooster Soup Co. is a popular Philadelphia luncheonette that has pledged to give all its profits to support Philadelphians in need through Broad Street Ministry’s Hospitality Collaborative. Given this mission, it is particularly important to Rooster Soup that it maximize sales and margins. Rooster Soup selected Caviar as its exclusive delivery partner to create another revenue stream while maintaining its high quality and standard of service.

Caviar has also expanded its group ordering capabilities. With Caviar for Teams, groups of diners have the ability to easily place large orders through Caviar with a shared cart. In April we acquired Zesty, which added a white-glove catering option for corporate customers to the Caviar for Teams offering. Both Caviar and our restaurant partners benefit from catering: It is predictable, creates repeat customers, and has larger ticket sizes with higher margins. This comprehensive approach of delivery, pickup, and corporate ordering resonates in a market like San Francisco, where Caviar is the top food-ordering platform.

Rooster Soup Co. is a popular Philadelphia luncheonette that selected Caviar as its exclusive delivery partner. More than 25% of food order volume is driven by restaurants that are exclusive to Caviar.

In June 2018, Cash App customers spent $250 million with Cash Card, nearly tripling since December 2017 and representing $3 billion on an annualized basis.

We continue to focus on extending Cash App beyond peer to peer to build an ecosystem of financial services that has daily utility for customers. In May we launched Cash Boost, a rewards program that gives customers instant discounts when they make Cash Card purchases at merchants such as coffee shops and national brands such as Shake Shack. Most card rewards programs require expensive annual fees and are associated with credit cards. With Cash Boost, we can provide more people with access to card benefits.

We further integrated Cash App with the Square ecosystem to give people faster access to their money. Via Cash App, Caviar couriers can now automatically receive payment immediately after completing a delivery, and they can spend the money immediately via Cash Card (or transfer the money to a bank account). This feature provides people who may be underbanked with fast access to their money and is a unique capability that Caviar is able to offer as part of the Square ecosystem. Nearly 30% of couriers who have joined Caviar since the launch of this integration have chosen to be paid instantly via Cash App.

Customer spend with Cash Card continues to grow: In June 2018—just one year since launch—customers spent $250 million. This spend has nearly tripled since December 2017 and represents $3 billion on an annualized basis. Overall, Cash App continues to increase in popularity: In the second quarter of 2018 in the U.S., it was the #1 finance app and on average a top-30 free app in the App Store. In the UK, Cash App has reached as high as the #10 finance app in just three months since launch.

GROSS PAYMENT VOLUME (GPV)

In the second quarter of 2018, we processed $21.4 billion in GPV, up 30% year over year. We continue to see strength from larger sellers. GPV from this group grew 42% year over year and accounted for 50% of total GPV, up from 46% in the second quarter of 2017.

REVENUE

Total net revenue was $815 million in the second quarter of 2018, up 48% year over year. This includes $37 million of bitcoin revenue. Excluding bitcoin revenue, total net revenue was $778 million, up 41% year over year.

Adjusted Revenue was $385 million in the second quarter of 2018, up 60% year over year.

Transaction-based revenue was $625 million in the second quarter of 2018, up 30% year over year. Transaction-based profit as a percentage of GPV was 1.08% in the second quarter of 2018, up from 1.04% in the second quarter of 2017. Transaction-based profit continued to benefit from growth in higher-margin products and improvements in our transaction cost profile.

Subscription and services-based revenue was $134 million on a GAAP basis in the second quarter of 2018, up 127% year over year. The Adjusted Revenue from subscription and services-based revenue was $137 million in the second quarter, up 131% year over year. Growth was driven primarily by Instant Deposit, Caviar, Cash Card, and Square Capital, as well as acquisitions completed in the second quarter. Instant Deposit volume was $4 billion in the second quarter, benefiting from both sellers and Cash App customers. In the second quarter of 2018, Square Capital facilitated over 60,000 business loans totaling $390 million, up 22% year over year.

Hardware revenue in the second quarter of 2018 was $18 million, up 78% year over year, driven by Square Register and continued growth in Square Stand and Square Reader for contactless and chip.

TOTAL NET REVENUE

ADJUSTED REVENUE

AS A PERCENTAGE OF GPV

SAFE HARBOR STATEMENT

This letter contains forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, statements regarding the future performance of Square, Inc. and its consolidated subsidiaries (the Company); the Company’s expected financial results for future periods; future growth in the Company’s businesses and products; the expected impact of the Company’s recent acquisitions; expectations regarding the Company’s ability to integrate its technologies; the Company’s expectations regarding scale, profitability, total addressable market, and the demand for or benefits from its products, product features, and services in the U.S. and in international markets; and management’s statements related to business strategy, plans, and objectives for future operations. In some cases, forward-looking statements can be identified by terms such as “may,” “will,” “appears,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Such statements are subject to a number of known and unknown risks, uncertainties, assumptions, and other factors that may cause the Company’s actual results, performance, or achievements to differ materially from results expressed or implied in this letter. Investors are cautioned not to place undue reliance on these statements. Actual results could differ materially from those expressed or implied, and reported results should not be considered as an indication of future performance.

Risks that contribute to the uncertain nature of the forward-looking statements include, among others, the Company’s ability to deal with the substantial and increasingly intense competition in its industry; changes to the rules and practices of payment card networks and acquiring processors; the impact of acquisitions or divestitures, strategic investments, or entries into new businesses; the effect of evolving regulations and oversight related to the Company’s provision of payments services and other financial services; the effect of management changes and business initiatives; and changes in political, business, and economic conditions; as well as other risks listed or described from time to time in the Company’s filings with the Securities and Exchange Commission (the SEC), including the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2018, which is on file with the SEC and available on the investor relations page of the Company’s website. Additional information will also be set forth in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018. All forward-looking statements are based on information and estimates available to the Company at the time of this letter and are not guarantees of future performance. Except as required by law, the Company assumes no obligation to update any of the statements in this letter.

KEY OPERATING METRICS AND NON-GAAP FINANCIAL MEASURES

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States (GAAP), we consider certain operating and financial measures that are not prepared in accordance with GAAP, including Gross Payment Volume, Adjusted Revenue, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income (Loss), Adjusted EPS, and non-GAAP operating expenses. We believe these metrics and measures are useful to facilitate period-to-period comparisons of our business and to facilitate comparisons of our performance to that of other payments solution providers.

We define Gross Payment Volume (GPV) as the total dollar amount of all card payments processed by sellers using Square, net of refunds. Additionally, GPV includes Cash App activity related to peer-to-peer payments sent from a credit card, and Cash for Business.

Adjusted Revenue is a non-GAAP financial measure that we define as our total net revenue less transaction-based costs and bitcoin costs, and we add back the impact of the acquired deferred revenue adjustment, which was written down to fair value in purchase accounting. We believe it is useful to subtract transaction-based costs and bitcoin costs from total net revenue to derive Adjusted Revenue as this is a primary metric used

by management to measure our business performance, and it affords greater comparability to other payments solution providers. Substantially all of the transaction-based costs are interchange and assessment fees, processing fees, and bank settlement fees paid to third-party payment processors and financial institutions. While some payments solution providers present their revenue in a similar fashion to us, others present their revenue net of transaction-based costs because, unlike us, they pass through these costs directly to their sellers and are not deemed the principal in these arrangements. Under our standard pricing model, we do not pass through these costs directly to our sellers. We deduct bitcoin costs because we consider our role in the bitcoin transactions to be facilitating customer access to bitcoin. Since we only apply a small margin to the market cost of bitcoin when we sell bitcoin to customers, and we have no control over the cost of bitcoin in the market, which tends to be volatile, we believe deducting bitcoin costs is a better reflection of the economic benefits as well as the Company’s performance from the bitcoin transactions. We recognize acquired deferred revenue that was written down for purchase accounting since we believe that it is correlated with ordinary and ongoing operations of the acquired company and facilitates analysis of revenue growth and business trends. We define Adjusted Revenue from subscription and services as the total net subscription and services based revenue adjusted to add back the impact of the write-down adjustment to acquired deferred revenue related to purchase accounting. We add back this deferred revenue that was written down since we believe it is correlated with ordinary and ongoing operations of the acquired company and facilitates analysis of revenue growth and business trends.The acquired deferred revenue adjustment was not included in prior periods because it was immaterial or zero. Adjusted Revenue has limitations as a financial measure, should be considered as supplemental in nature, and is not meant as a substitute for the related financial information prepared in accordance with GAAP.

Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted EPS, and non-GAAP operating expenses are non-GAAP financial measures that represent our net loss and net loss per share, adjusted to eliminate the effect of share-based compensation expenses, amortization of intangible assets, amortization of debt discount and issuance costs in connection with our offering of convertible senior notes in the first quarter of 2017 and in the second quarter of 2018, the gain or loss on the sale of property and equipment, and impairment of intangible assets, as applicable. We also exclude certain costs associated with acquisitions that are not normal recurring operating expenses, including amounts paid to redeem acquirees’ unvested stock-based compensation awards, and legal, accounting, and due diligence costs, and we add back the impact of the acquired deferred revenue and deferred cost adjustment, which was written down to fair value in purchase accounting. Such amounts were not included in prior periods as they were immaterial or zero. In addition to the items above, Adjusted EBITDA and non-GAAP operating expenses are non-GAAP financial measures that also exclude depreciation, other cash interest income and expense, other income and expense, and provision or benefit from income taxes, as applicable. Basic Adjusted Net Income (Loss) Per Share is computed by dividing the Adjusted Net Income (Loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted Adjusted Net Income Per Share is computed by dividing Adjusted Net Income by the weighted-average number of shares of common stock outstanding, adjusted for the dilutive effect of all potential shares of common stock.

We have included Adjusted EBITDA and Adjusted EPS because they are key measures used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe that Adjusted EBITDA and Adjusted EPS provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain non-cash items and certain variable charges. Adjusted EBITDA and Adjusted EPS have limitations as financial measures, should be considered as supplemental in nature, and are not meant as substitutes for the related financial information prepared in accordance with GAAP.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.